Shares in the online discussion platform fell 25% on Friday morning after the company issued a lower-than-expected revenue outlook. The headline notes that analysts say this may not be the last of the bad news.
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Reddit beat estimates in the third quarter with EPS of $1.40 versus $1.35 expected and revenue of $895 million versus $878 million, but its shares fell over 11% on weak fourth-quarter guidance of $1 billion to $1.03 billion, below the $1.05 billion Wall Street estimate. The company plans to require users to create official accounts to access the platform, with testing starting in the fourth quarter outside the U.S., as CEO Steve Huffman said shrinking search referral traffic from Google has played a major role. Daily active uniques rose 12% year over year to 130.3 million but trailed the 133.7 million estimate, while U.S. DAUq fell 2% to 50.7 million. Huffman said the company is still growing at an industry leading rate and is focusing on app users and logged-in users, who generate most of its revenue. Its other revenue segment, including data licensing, rose 35% year over year to $48 million, and Reddit is still negotiating its data-licensing deal with Google.
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Reddit reported daily active user growth that was weaker than expected. This is the reason given for the stock falling despite the earnings beat.
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Wedbush says Reddit (RDDT) faces near-term pressure on daily active users (DAU) ahead of its Q3 report on Oct. 29. According to the headline, strong advertising trends are expected to offset this pressure.
- Googling for Reddit answers is about to get harder
Reddit will first test its new approach outside the U.S. The change could reshape how millions of people find real-world advice.
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